Pearson Shares Dive on Profit Warning -- 2nd Update
January 18 2017 - 6:01AM
Dow Jones News
By Ian Walker
LONDON--Shares in Pearson PLC plunged more than 26% on Wednesday
after the world's largest education company issued a profit warning
for 2018, warned of lower future dividends and said it plans to
sell its stake in its Penguin Random House publishing joint
venture.
Pearson blamed further declines in the North American
higher-education courseware business for the warning, but said it
still expects its 2016 operating profit to be in line with its
previous guidance.
It plans to sell or recapitalize its 47% stake in Penguin Random
House to bolster its finances and invest in other parts of its
business. Its joint-venture partner, German media company
Bertelsmann SE, said it was open to raising its stake in the
publishing house "provided the financial terms are fair."
The publishing house was formed in 2013 when the two companies
combined their book-publishing businesses.
Pearson's share price has almost halved in the past three years
and the company has laid off thousands of employees amid trading
pressures in key markets. It has sold several assets during the
period, including the Financial Times newspaper and its 50%
noncontrolling stake in the publisher of the Economist magazine, to
fund its growth across global education, raising billions of
dollars.
While higher education in North America remains Pearson's
biggest problem, the company also has faced setbacks in its efforts
to capitalize on the Common Core primary- and secondary-education
standards that have faced a backlash in several U.S. states.
Wednesday's stake sale will form part of broader plan by Pearson
to reshape its portfolio while it accelerates its digital
transition into higher education.
It reported an 8% fall in revenue in 2016 in underlying terms,
which strip out one-off items. It expects to report an adjusted
operating profit of GBP630 million ($777.1 million) for the
year.
The company added that it plans to recommend a final dividend of
34 pence for 2016, making a total payout for the year of 52 pence.
However, it said that from 2017 it intends to rebase its dividend
to reflect portfolio changes, increased investment, and earnings
guidance.
Ulrike Dauer in Frankfurt contributed to this article.
Write to Ian Walker at ian.walker@wsj.com
(END) Dow Jones Newswires
January 18, 2017 05:46 ET (10:46 GMT)
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